How is EO Measured?

The Miller/Covin and Slevin (1989) Scale

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The predominant way of measuring EO is using the Miller/Covin and Slevin (1989) Instrument. Indeed, research suggests that the vast majority of prior studied on EO have employed the Miller/Covin and Slevin (1989) conceptualization. An empirical review of the EO literature by Wales, Gupta, and Mousa (2013) observed roughly 80% of prior studies to adopt this conceptualization. Moreover, a meta-analysis of the EO-firm performance relationships by Rauch, Wiklund, Lumpkin, and Frese (2009) similarly observed the Miller/Covin and Slevin (1989) measurement instrument to be the most frequently used method of measuring EO and found the instrument to produce similar results to other variants of the instrument. Thus, the simplest way to examine EO is to summate the nine-items below.

Of note, the item beginning 'typically seeks to avoid competitive clashes' is often replaced by the Lumpkin and Dess (2001) proactiveness item (see below) because it arguably taps into competitive aggressiveness more so than proactiveness.

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A second addendum is that while the psychometric properties of the scale have been generally stable, and defended on the basis of a triangulation of managerial attitudes and firm behaviors (see Covin and Lumpkin, 2011), work has also suggested that a six-item subset may be useful as well (see Hansen et al., 2011).

Computer Aided Text Analysis (CATA) Measures

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A computer aided text analysis measure of EO has also been advanced. Please refer to the work of Short and colleagues for a thorough discussion of how the dictionaries were originally constructed and their validity, and note that the dictionaries have been revised based upon the work of McKenny, Aguinis, Short, and Anglin (2018a). McKenny has developed a fully functional (and free) tool for conducting computer-aided text analysis which can be downloaded here. Please note that there are now three dictionaries for EO, (a) the original Short et al. (2010) measure, (b) revised general purpose EO McKenny et al. (2018a) EO dictionaries, and (c) high-tech industry specific dictionaries McKenny et al. (2018b).

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Beyond these dictionaries, scholars have been encouraged to develop context specific adaptations to the EO dictionaries. For instance, Watson et al. (2019), note “As proposed by Short et al. (2010), we supplemented the core EO dictionary with an inductive procedure, which was based upon word choices within our particular context (franchise recruitment advertisements) through an examination of the texts. The list of deductively derived words was independently coded to the specific EO rhetoric dimensions.” This approach better fits the dictionaries to unique contexts.

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Moreover, most all studies normalize the dictionary word counts based upon document length. However, other studies have also sought to account for industry norms. For instance, Gruhn et al. (2017), note that they “subtract the yearly average of the EO of competitors in the same industry (based on two-digit SIC codes and the full sample of 460 firms) to control for a variation in narrative themes over the course of our observation period as well as for the possibility of different strategic patterns in different industries.” Methodological advances are certainly welcome.

Proactiveness: Was assessed using the percentage of profits reinvested in the company each year compared with that of rivals in the same industry.

Risk-Taking: Idiosyncratic or “unsystematic risk” was assessed according to the magnitude of the fluctuations in a firm’s share price that could not be attributed to industry or economic factors (Fama, 1968).

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Kreiser et al. (in press) provide a lengthy discussion regarding the measurement of EO using secondary data, and offer a secondary behavioral measure of EO as the combination of innovativeness and proactiveness:

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Innovativeness: Firm’s industry-adjusted research and development intensity (R&D expenses / total assets)

Proactiveness: Firm’s industry-adjusted retention ratio (the percentage of profits a firm reinvests in the company each year [(Net Income – Dividends) / Net Income]).

Measures for the Lumpkin and Dess (1996) Conceptualization

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Lumpkin and Dess (1996) suggest that researchers should seek deeper insight into the individual dimensions which characterize an organization's EO. In this vein, Lumpkin and Dess (2001) propose new items for capturing proactiveness and competitive aggressiveness more distinctly.

Specifically, Lumpkin and Dess (2001) suggest that the third proactiveness item in the Miller/Covin and Slevin (1989) scale, the one which begins 'Typically seeks to avoid...' more closely measures competitive aggressiveness than proactiveness. To further capture competitive aggressiveness as a distinct phenomenon, they also offer a new second item to measure competitive aggressiveness. Taken together, these two items form a scale for competitive aggressiveness. They also offer a replacement item for proactiveness, also listed below.

Lumpkin, Cogliser, and Schneider (2009) offer a measure of autonomy, the fifth dimension of EO suggested by Lumpkin and Dess (1996). These items are an excerpt from: